WEDC Pursuing Legal Action Against Kestrel Aircraft Company

The Wisconsin Economic Development Corporation is pursuing legal action against an aircraft company that once planned to build a plane manufacturing facility in Superior. The state claims the company hasn’t made loan payments in almost a year.

WEDC awarded Kestrel Aircraft Company millions of dollars in loans five years ago with the hopes of creating 600 jobs in Superior. The jobs haven’t materialized, and the company defaulted on its loans earlier this year.

In May, the state, city of Superior and Douglas County agreed to give Kestrel more time to pay back the loans for the project. But, the company missed the new Aug. 31 deadline.

Douglas County Board Chairman Mark Liebaert said the project was as big a deal to the region as Foxconn is to southern Wisconsin.

"We had a lot of economic development that hinged on whether or not this company came here. I think we did our best to try to make sure that happened," he said. "I think our forbearance was part of that, to try to continue to make sure that there was a chance that this could move forward. It appears at this time that there’s probably not a chance that it’s going to move forward anymore."

Liebaert said city and county officials are disappointed the company and state were unable to work out issues with financing for the facility. He noted he would still be open to discussions with the company if there was some way the project could move forward.

"The benefit to our community would’ve been huge, and I think it was too great for us to have not taken a chance on it," he said. "From that standpoint, I’m actually a little disappointed that it didn’t work out even more than I’m disappointed that we lost the money."

The county had invested just under half a million dollars in the project. Liebaert said he expects to discuss the county’s options on the loan at the next meeting for the Douglas County Revolving Loan Fund, which has yet to be scheduled.

In the lead up to the project, Superior offered Kestrel two parcels of land and $1.125 million in tax incremental financing, as well as a $2.4 million loan. Superior Mayor Jim Paine said in an email late Tuesday evening that Kestrel was required to pay around $1,000 in legal fees as part of entering into a forbearance agreement, but the company didn’t follow through with the payment or reporting on time. He said the city plans to meet in the near future to consider next steps with regards to Kestrel.

On Tuesday, while in Cadott, Gov. Scott Walker said the state is making pretty good progress on collecting past due loans.

"There’s a few issues out there like there were with the department of commerce and others in the past. We continue to expect the Wisconsin Economic Development Corporation and the department of revenue and department of administration to be working to push back."

A WEDC spokesman said the state has reduced its outstanding loan balance by roughly $2.2 million since last December. WEDC said loans to Kestrel make up just under 40 percent of the agency’s $8.7 million in past due loans. A May audit found the agency’s outstanding loans had grown from $1.3 million in 2014 to $11 million as of December 2016.

In 2015, Kestrel and Eclipse Aerospace merged to form ONE Aviation. CEO Alan Klapmeier said the state failed to follow through on its word to provide up to $90 million in tax credits for the project in Superior, causing a domino effect of uncertainty with investors.

Speaking over the phone Tuesday, Klapmeier said he’s trying to stay in business, preserve jobs, make the project work and pay the state back.

"We’ve tried to live up to our end of the deal," he said.

Klapmeier said the company missed the Aug. 31 deadline because financial agreements they’ve been working on with other entities "didn’t meet their end of the deal."

The company has failed to make payments outside of Wisconsin as well.

Just last week Midcoast Regional Redevelopment Authority terminated its lease with Kestrel Aeroworks because the company had missed rent payments. Kestrel had been working with officials there to launch production of its single-engine turboprop plane, but Wisconsin’s incentives package encouraged the company to move to Superior instead.

Klapmeier said the company met with airport officials in Brunswick this summer, offering to move out of the area. But, he said officials agreed to work out a solution instead.

"We believe in the product. We believe in the industry. We believe in the people," he said.

Steve Levesque of the Midcoast Regional Redevelopment Authority told the Portland Press Herald that Kestrel had not paid rent in more than a year.

In addition to projects in Maine and Wisconsin, ONE Aviation has also eyed projects in Minnesota.

Last year, the company sought a $1.5 million loan from the Iron Range Resources and Rehabilitation Board to the company for development of a facility at the Grand Rapids, Minnesota, airport that would help make parts for one of Kestrel’s planes. Klapmeier said they have a few employees working there to create composite parts for the Eclipse jet, a plane they’ve been focusing on developing for the last couple of years.

Klapmeier said they’re still exploring options on where to build its single-engine turboprop plane and there are "a lot of reasons still to do it in Superior."

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